"Isn't the key to ensuring that remuneration is brought under proper control that those institutional shareholders exercise their rights and that the government changes the rules so that votes at shareholder meetings on executive pay are binding on boards," he demanded at question time.

Business minister Baroness Neville-Rolfe said Lord Forsyth had made a very good point and binding votes was one of the options the government would be looking at.

She said a consultation document would be published later this year, setting out a range of options for improving corporate governance, including measures to "strengthen the way executive pay is set and reported".

Amid growing concern about the spiralling level of top executive pay, Labour spokesman Lord Stevenson of Balmacara contrasted a 25p per hour rise in the national minimum wage to a reported 10% pay increase for FTSE100 chief executives in the last year.

He urged ministers to confirm that the consultation would include more consumers and employees on company boards and greater remuneration transparency.

Lady Neville-Rolfe said the precise wording was being looked at but the idea was to explore ideas floated recently by the Prime Minister, including binding votes, employee representation and full disclosure of bonus arrangements.